Amazon.com Inc. has announced plans to double the number of its same-day delivery facilities in the United States in the “coming years.” This move is seen as crucial for Amazon to maintain its lead in the $1.4 trillion online shopping market.
According to Amazon, more than half of all orders placed by Prime subscribers in the 60 largest metropolitan areas during the last quarter arrived the same or next day. Additionally, the company revealed that it has delivered over 1.8 billion units to Prime members in the US with same-day or one-day delivery so far this year, a significant increase compared to 2019.
This announcement comes just before Amazon is set to release its second-quarter financial results. It reflects the company’s efforts to boost investor confidence in its e-commerce business, which has been experiencing slower online sales growth. Amazon has become increasingly reliant on its cloud-computing business for profits, which has also been slowing down.
While Amazon did not disclose the current number of same-day warehouses it operates, doubling this number would likely involve constructing numerous new facilities. Currently, Amazon offers millions of products for same-day delivery in 90 metropolitan areas across the US. Same-day facilities are strategically located closer to major population centers, providing faster delivery compared to Amazon’s larger warehouses situated on the outskirts of cities.
Doug Herrington, Amazon’s Worldwide Stores chief, highlighted the advantages of these hybrid facilities, stating that they enable the company to fulfill, sort, and deliver packages from a single site, resulting in even faster customer deliveries. The product selection available on Amazon varies by city, as it is regularly updated based on top customer items and seasonal demand in each area.
Amazon’s emphasis on fast delivery has played a significant role in its dominance of the US market. The company captures over one-third of all spending, which is approximately six times more than its closest competitor, Walmart Inc., according to estimates by Insider Intelligence. However, investors have expressed concerns about the costs associated with packing and delivering orders, which can impact profit margins. Traditional retailers like Walmart have an advantage due to their stores serving as convenient pickup locations.
Neil Saunders, an analyst at Globaldata Plc, suggests that Amazon’s investment in same-day delivery will elicit mixed reactions from investors. While some will be encouraged by the potential for increased sales and improved operational efficiency, others may worry about the upfront costs and the time it takes for savings to offset the investment. Building same-day facilities can be expensive and require significant automation.
Amazon’s focus on delivery speed coincides with an ongoing trial in Washington state, where the company is being investigated for warehouse safety and worker injuries. State officials have alleged that Amazon facilities impose hazardous conditions on workers, including long shifts, mandatory overtime, and physically demanding work. Amazon denies these allegations and plans to present its case during hearings scheduled to continue into the fall.
Amazon is set to report its financial results for the quarter ending June 30 on Thursday. Analysts are projecting earnings of 35 cents per share on sales of $132 billion.